HMRC internal manual

VAT Charities

Grant funding

When does funding become consideration for a supply?

Charities often receive funding from local authorities and Government Departments to support their charitable activities. You will need to consider whether the funds received by the charity are an outside the scope grant or are consideration for a supply.

What if a charity has incorrectly treated funding as an outside the scope grant?

You will need to consider the correct liability of the supply being made by the charity. If the supply is taxable then it may be appropriate for you to assess the charity for the tax due on the supplies made, which the charity can in turn charge on to the funder. However, before assessing you should carefully consider all the papers available regarding the funding. The responsibility is on the charity, as the supplier, to determine the VAT liability of the supply.

Reliefs available

Where possible we have provided additional guidance to that available in Notice 701/1 (HMRC website) Charities. In some instances additional information can be found elsewhere in departmental guidance.

VAT Relief Further information
Advertising and goods connected with collecting donations VCHAR11000
Aids for the disabled V1-07, Chapter 12 VAT reliefs for disabled people
Construction Notice 708 (HMRC website)
Buildings and construction    
  Drugs and chemicals VCHAR15000
  Equipment for talking books and newspapers VCHAR12000
  Fuel and power Notice 701/19 (HMRC website) Fuel and power
  Lifeboats, slipways etc. VCHAR13000
  Medical and scientific equipment (“relevant goods”) VCHAR14000
  Medicinal products VCHAR15000
  Rescue equipment Notice 701/1 (HMRC website) Charities
  Resuscitation training models Notice 701/1 (HMRC website)Charities